Source: TBS documents submitted to Senate national finance committee.
The Senate national finance committee has been quizzing Treasury Board officials on the rising costs of benefits.
The story the TBS numbers tell: the health and dental plans are growing at 9.9 per cent annually. Disability-plan costs are rising at eight per cent a year, driven largely by mental-health claims, which now account for more than half of all disability benefits. And then there’s the RCMP disability plan – a separate plan funded from the same Treasury Board envelope — growing at 22 per cent annually.
Benefit-plan membership has also grown 14 per cent since 2020 as the public service expanded under the Trudeau government. More members mean more claims, more expenditures. The workforce is now being cut – but benefit costs don’t shrink as quickly as headcount does. Retirees leave the payroll but they don’t leave the health and dental plans. The government continues to pay.
Drug costs are a growing part of the pressure. Ozempic, for example, is covered under the federal plan for diabetes – not weight loss – but it costs far more than the medications it’s replacing, and prescriptions are rising fast.
Six years and counting. The disability plan is under pressure from rising claims, especially mental health. A decade ago, then-PCO clerk Janice Charette made employee wellness and mental health a management priority — one that successive clerks have continued.
Today, nearly 60 per cent of disability claims are for mental-health conditions, with cancer a distant second. It’s not necessarily that people are sicker. Many argue the stigma around mental health is gone, so people come forward. Younger workers in particular don’t think twice about filing a mental-health claim the way an earlier generation might have.
Last year, public servants filed about 5,560 federal disability claims – a 9.3-per-cent increase over the previous year, the latest in a six-year stretch of record claim volumes. Sun Life’s actuary had already flagged the problem, projecting a significant loss for 2025 because claims growth was expected to outpace premiums and investment income.
Women are driving the trend, with nearly 75 per cent of approved mental-health claims. Women make up about 57 per cent of the public service, so their higher share partly reflects workforce composition – though the gap is wider than numbers alone explain.
Executives have a separate disability plan. Those numbers aren’t public.
The political calculation. The last piece of the compensation puzzle? Politics. The bargaining context has shifted dramatically since the last round of bargaining – and largely in the government’s favour.
The Carney government has a majority now. A weakened NDP has no leverage over the Liberals. The public service is absorbing 16,000 job losses and is facing another return-to-office order. Unions are heading into this round with far less clout than they had when they called the 2023 strike.
The fiscal story the government is trying to tell this year is simple: we are reducing the size and cost of the public service. PBO puts personnel spending at 54 per cent of federal operating costs. When more than half your operating budget is people, holding the line on wages is the most visible lever you have.
Whose bill is it? The benefit plans – health, dental, disability – are not set by government alone. They are negotiated with unions and delivered through third-party insurers such as Sun Life. But they are negotiated separately from wages and separately from pensions. That structure has long been flagged as a problem.
More than 20 years ago, former senior Treasury Board official James Lahey argued in a landmark compensation study that this fragmented approach “works against cost control.” Benefits negotiated here, wages there, pensions somewhere else – with no one responsible for the total bill.
“No longer should it be acceptable to discuss or consider one component of federal compensation in isolation from the others,” he wrote.
Lahey said weak co-ordination and uneven oversight have led government to pay more than necessary. The piecemeal approach has contributed to boom-and-bust swings in the size and cost of the public service over time, he added.
Under the Trudeau government, the workforce grew by more than 40 per cent. Now it’s being cut.
One of Lahey’s recommendations was to broaden collective bargaining so both sides are forced to make tradeoffs and share responsibility for the total compensation envelope . It’s a position PSAC has always supported. The government has never shown any interest.
Good luck with that. Treasury Board later adopted a policy framework for compensation built on four principles: fair pay relative to the private sector, internal equity between job categories, performance, and affordability. Simple enough.
But those four principles must then be balanced against three additional considerations: economic-policy goals, social-policy objectives, and public expectations and pressures. That means the tension between what workers demand, what the public expects, and what politicians want is baked into compensation policy – and ripe for disagreement.
Also, no workforce has a more complicated pay regime – think how it snarled Phoenix. Twenty-eight collective agreements, 17 unions, 72 job classifications. Make a change for one group and it upsets the apple cart internally – ripple effects everywhere.
So are they underpaid? Treasury Board reports that federal-sector wages increased 15.5 per cent between 2021 and 2025 – lagging 1.8 per cent behind the private sector. Don’t hear that too often. Small business has argued for years that federal workers are overpaid and out of step with the market.
.png?upscale=true&width=1056&upscale=true&name=ImmigSeries%20Horz%20Banner%20(1).png)